Martha Stewart Court Issues Another Privilege Opinion

January 14, 2004

The ongoing prosecution of Martha Stewart has already generated an interesting opinion dealing with the different waiver rules for the attorney-client privilege and the work product doctrine (addressed in an earlier Privilege Point). Now the Court has issued another opinion—dealing with the crime-fraud exception. The crime-fraud exception involves the common-sense principle that the law will not protect communications that advance a future criminal misdeed. In addition to the type of wrongdoing covered by the exception (all courts agree that such wrongdoing includes crimes and frauds, while others extend it to all intentional wrongdoing, etc.), the main issue is what connection there must be between the communication and the wrongdoing.

In United States v. Martha Stewart, No. 03 Cr. 717 (MGC), U.S. Dist. LEXIS 23180 (S.D.N.Y. Dec. 29, 2003), the Court rejected the government’s attempt to obtain protected communications between Martha Stewart and her lawyers. The government had argued “that the existence of the Indictment in this case eliminates the attorney-client privilege or work product protection with regard to evidence relating to statements charged in the Indictment.” Id. at *4. Citing an earlier Second Circuit case, the Court rejected this position, explaining that the crime-fraud exception does not apply “simply because privileged communications would provide an adversary with evidence of a crime or fraud . . . [i]nstead, confidential communications must be in furtherance of the criminal or fraudulent conduct for the crime-fraud exception to apply” (emphasis added). Id. at *5.

This decision furthers a recent trend against an expansive interpretation of the crime-fraud exception.